AMG AMG Critical Materials NV

AMG Advanced Metallurgical Group N.V. Reports Record Earnings for Second Quarter 2022

Strategic Highlights

• Construction and commissioning of the new vanadium spent catalyst recycling facility in Zanesville, Ohio is proceeding as planned. The roaster is fully operational, and the entire plant is expected to be at run-rate capacity by the end of the fourth quarter of 2022.
• The project to expand the spodumene production in AMG Brazil is on time and on budget. The objective is to be in full production in the second half of 2023 or earlier.
• AMG Lithium has started construction of the first European lithium refinery, and commissioning for the first module of the battery-grade lithium hydroxide upgrader will commence in the second half of 2023.
• AMG’s first lithium vanadium battery (“LIVA”) for industrial power management applications is proceeding as planned and the objective is to be fully operational in the fourth quarter of 2022.
• Shell & AMG Recycling B.V. (“SARBV”) and its partner, the United Company for Industry (“UCI”), have signed an agreement with Saudi Arabian Oil Company (“Aramco”). Basic engineering has begun on the first of four projects to build, own and operate a conversion plant of vanadium-containing gasification ash supplied by Aramco into vanadium oxide and vanadium electrolyte.

Financial Highlights

• Revenue increased by 42% to $424.1 million in the second quarter of 2022 from $298.4 million in the second quarter of 2021.
• EBITDA was $81.1 million in the second quarter of 2022, up 158% versus the second quarter 2021 EBITDA of $31.4 million, marking the highest six-month and quarterly EBITDA in AMG’s history and its eighth straight quarter of sequential improvement.
• Annualized return on capital employed was 25.5% for the first six months of 2022, more than double the 10.0% for the same period in 2021.
• Net income to shareholders for the second quarter of 2022 was $29.6 million, yielding 91 cents diluted earnings per share, compared to $3.6 million of net income to shareholders in the same period in the prior year and 11 cents diluted earnings per share.
• AMG’s liquidity as of June 30, 2022, was $476 million, with $301 million of unrestricted cash and $175 million of revolving credit availability.
• AMG declares an interim dividend of €0.30 per ordinary share, to be paid in the third quarter of 2022.

Amsterdam, 28 July 2022 (Regulated Information) --- AMG Advanced Metallurgical Group N.V. (“AMG”, EURONEXT AMSTERDAM: “AMG”) reported second quarter 2022 revenue of $424.1 million, a 42% increase versus the second quarter of 2021. EBITDA for the second quarter of 2022 was $81.1 million, a 158% increase versus the second quarter of 2021. This also marks the eighth straight quarter of sequential growth after the pandemic low point in the second quarter of 2020.

Dr. Heinz Schimmelbusch, Chairman of the Management Board and CEO, said, “AMG generated the highest quarterly EBITDA in our history in the second quarter of 2022. EBITDA for the second quarter of 2022 was $81 million, up 158% from the same period in 2021, and 48% higher than the first quarter of 2022. This outstanding result is mainly driven by our AMG Clean Energy Materials segment, where strong lithium prices lead to improved profitability in AMG Brazil, as well as by increased aerospace activity within our AMG Critical Materials Technologies segment.

“All of AMG’s strategic projects cluster in our AMG Clean Energy Materials segment and all of these projects are proceeding as planned. Each of these projects is oriented toward growing our production of electricity storage materials or increasing our footprint in the circular economy.

1. Commissioning has started at the Zanesville, Ohio, spent catalyst recycling facility. The roasting plant has reached its design capacity and is presently undergoing the final performance test. The “melt shop” is starting its commissioning process. With this new recycling plant, AMG solidifies its position as the world leader in the recycling of refinery waste. We are pleased to announce that large scale shipments of refinery waste from overseas have started.
2. The expansion project of AMG Brazil’s lithium concentrate production is proceeding as planned and the production is fully sold at market price via long-term contracts.
3. AMG Lithium has begun construction of the first European lithium refinery. The first module of the battery-grade lithium hydroxide upgrader will commence commissioning in the second half of 2023.
4. AMG’s first lithium vanadium battery (“LIVA”) for industrial power management applications has begun commissioning.
5. SARBV and UCI recently signed agreements in the Kingdom of Saudi Arabia. The joint venture plans to execute four distinct projects under an entity currently being formed, Advanced Circular Materials Company (“ACMC”):
   1. Build, own and operate a conversion plant of vanadium-containing gasification ash into vanadium oxide and vanadium electrolyte for redox flow batteries;
   2. A spent catalyst recycling facility;
   3. A fresh catalyst R&D laboratory;
   4. Mass energy storage facilities (vanadium redox flow battery manufacturing).

Basic engineering for the first project has begun and it will lay the foundation for all other projects with the Supercenter. It will produce and sell high-purity vanadium oxide and vanadium electrolyte. This is the largest such project in the world and is under long-term market-based contracts with Aramco. The materials this project will produce are destined to feed the emerging vanadium redox flow battery market.

“We are extremely pleased to announce the accomplishments of these strategic projects along with the best quarterly results in the history of the Company.”

Key Figures

In 000’s US dollars
	Q2 ‘22	Q2 ‘21	Change
Revenue	$424,094	$298,374	42%
Gross profit	102,240	48,499	111%
Gross margin	24.1%	16.3%
Operating profit	65,246	3,691	1,668%
Operating margin	15.4%	1.2%
Net income attributable to shareholders	29,631	3,566	731%
EPS - Fully diluted	0.91	0.11	727%
EBIT (1)	69,763	20,462	241%
EBITDA (2)	81,126	31,401	158%
EBITDA margin	19.1%	10.5%
Cash from operating activities	39,505	23,018	72%

Notes:

(1)   EBIT is defined as earnings before interest and income taxes. EBIT excludes restructuring, asset impairment, inventory cost adjustments, environmental provisions, exceptional legal expenses, equity-settled share-based payments, and strategic expenses.(2)   EBITDA is defined as EBIT adjusted for depreciation and amortization.

Operational Review

AMG Clean Energy Materials

	Q2 ‘22	Q2 ‘21	Change
Revenue	$159,762	$90,135	77%
Gross profit	60,821	13,822	340%
Gross profit before non-recurring items	61,654	16,122	282%
Operating profit (loss)	49,704	(7,415)	N/A
EBITDA	58,232	12,554	364%

AMG Clean Energy Materials’ revenue increased 77% compared to the second quarter of 2021, to $159.8 million, driven mainly by higher prices in vanadium, tantalum and lithium concentrates. Sales volumes were down due to shipping schedule variances from AMG Brazil and maintenance downtime at our Cambridge facility.

Gross profit before non-recurring items for the quarter increased 282% compared to the same period in the prior year, primarily due to the increased price environment.

SG&A expenses in the second quarter of 2022 were $11.1 million, $1.6 million higher than the second quarter of 2021, largely due to higher share-based and variable compensation expense.

The second quarter 2022 EBITDA increased 364%, to $58.2 million, from $12.6 million in the second quarter of 2021, due to the improved gross profit as noted above.

AMG Critical Minerals

	Q2 ‘22	Q2 ‘21	Change
Revenue	$103,416	$76,793	35%
Gross profit	14,028	13,732	2%
Gross profit before non-recurring items	14,029	13,397	5%
Operating profit	7,086	7,009	1%
EBITDA	9,069	9,220	(2%)

AMG Critical Minerals’ revenue increased by $26.6 million, or 35%, to $103.4 million, driven by strong sales volumes of antimony and graphite as well as higher sales prices in silicon and antimony.

Gross profit before non-recurring items of $14.0 million in the second quarter was $0.6 million higher compared to the second quarter of 2021. The higher revenue was due to the improved pricing and higher sales volumes noted above and was offset by increased raw material prices as well as the ongoing rise in energy and shipping costs.

SG&A expenses in the second quarter of 2022 slightly increased by 2%, to $7.0 million, compared to the same period in 2021.

The second quarter 2022 EBITDA was consistent with the same period in the prior year despite ongoing inflationary pressures including energy and shipping cost increases.

AMG Critical Materials Technologies

	Q2 ‘22	Q2 ‘21	Change
Revenue	$160,916	$131,446	22%
Gross profit	27,391	20,945	31%
Gross profit before non-recurring items	27,431	21,059	30%
Operating profit	8,456	4,097	106%
EBITDA	13,825	9,627	44%

AMG Critical Materials Technologies' second quarter 2022 revenue increased by $29.5 million, or 22%, compared to the same period in 2021. This improvement was due to increased titanium alloys sales, as well as higher chrome metal pricing associated with improving conditions in the aerospace sector. Second quarter 2022 gross profit before non-recurring items increased by $6.4 million, or 30%, to $27.4 million due to the higher volumes and prices.

SG&A expenses increased by $2.1 million in the second quarter of 2022 compared to the same period in 2021, mainly driven by higher share-based and variable compensation expense and higher professional fees in the current quarter.

AMG Critical Materials Technologies’ EBITDA increased to $13.8 million during the quarter, compared to $9.6 million in the second quarter of 2021. This was primarily due to higher profitability in chrome metal and titanium alloys.

AMG Engineering signed $59.8 million in new orders during the second quarter of 2022, driven by strong orders of induction furnaces, representing a 1.10x book to bill ratio. Order backlog was $181.0 million as of June 30, 2022, slightly lower than the $183.5 million as of March 31, 2022.

Financial Review

Tax

AMG recorded an income tax expense of $23.2 million in the second quarter of 2022, compared to an income tax benefit of $5.6 million in the same period in 2021. This variance was mainly driven by higher pre-tax income compared to the prior period and movements in the Brazilian real versus the US dollar. The effects of the Brazilian real caused a $3.8 million non-cash tax expense in the second quarter of 2022 compared to a $12.4 million non-cash tax benefit in the second quarter of 2021. Movements in the Brazilian real exchange rate impact the valuation of the Company’s net deferred tax positions related to our operations in Brazil.

AMG paid taxes of $9.1 million in the second quarter of 2022, compared to tax payments of $2.5 million in the second quarter of 2021.

Exceptional Items

AMG’s second quarter 2022 gross profit includes exceptional items, which are not included in the calculation of EBITDA.

A summary of exceptional items included in gross profit in the second quarters of 2022 and 2021 are below:

Exceptional items included in gross profit

	Q2 ‘22	Q2 ‘21	Change
Gross profit	$102,240	$48,499	111%
Inventory cost adjustment	—	1,497	N/A
Restructuring expense	41	334	(88%)
Asset impairment reversal	—	(640)	N/A
Strategic project expense	833	888	(6%)
Gross profit excluding exceptional items	103,114	50,578	104%

Energy Costs

Total energy costs were $9.9 million higher in the second quarter of 2022 versus the same period in 2021 due to significant increases in gas and electricity costs during the quarter. The majority of this increase was at our silicon business in Germany, but that business benefited from fully hedged power costs. Other business units benefited from long-term electricity contracts that have no price escalation clauses, and the business units that did experience energy cost increases were able to pass through most of these increased costs to their customers.

SG&A

AMG’s second quarter 2022 SG&A expenses were $37.0 million compared to $33.2 million in the second quarter of 2021, with the variance largely driven by higher compensation expense due to higher profitability forecasted for the year and increased professional fees associated with strategic projects.

Liquidity

	June 30, 2022	December 31, 2021	Change
Senior secured debt	$365,751	$371,897	(2%)
Cash & cash equivalents	300,758	337,877	(11%)
Senior secured net debt	64,993	34,020	91%
Other debt	22,644	24,398	(7%)
Net debt excluding municipal bond	87,637	58,418	50%
Municipal bond debt	319,363	319,476	—%
Restricted cash	42,182	93,434	(55%)
Net debt	364,818	284,460	28%

AMG had a net debt position of $364.8 million as of June 30, 2022. This increase was mainly due to the significant investment in growth initiatives during the quarter.

AMG continued to maintain a strong balance sheet and adequate sources of liquidity during the second quarter. Employee benefit liabilities decreased $55 million during the quarter to $108 million mainly due to rising discount rates. This decrease in employee benefit liabilities combined with AMG’s higher earnings have increased our equity attributable to shareholders to $357 million, a 33% increase over the year-end value.

As of June 30, 2022, the Company had $301 million in unrestricted cash and cash equivalents and $175 million available on its revolving credit facility. As such, AMG had $476 million of total liquidity as of June 30, 2022.

Net Finance Costs

AMG’s second quarter 2022 net finance costs were $12.2 million compared to $4.8 million in the second quarter of 2021. This increase was mainly driven by non-cash intergroup related foreign exchange losses of $7.5 million during the quarter.

AMG capitalized $2.1 million of interest costs in the second quarter of 2022 versus $3.8 million in the same period in 2021, driven by interest associated with the Company’s tax-exempt municipal bond supporting the vanadium expansion in Ohio. This decrease is due to a portion of the municipal bond interest costs which are no longer being capitalized due to the ramp up of production at our Zanesville facility.

Outlook

AMG continues to provide strong and consistent results despite the global economic fallout from the geopolitical turbulence in recent months. We are continuing to focus on the things we can control and are extremely pleased with the noted achievements in our strategic initiatives which will drive long-term value creation. EBITDA was $81.1 million in the second quarter of 2022, the highest quarterly EBITDA in AMG’s history. As mentioned, it was the eighth straight quarter of sequential improvement.

As the year has progressed and more information is available, AMG is increasing its EBITDA guidance for the full year 2022 to a range of between $280 million and $300 million. This range is supported by AMG’s geographic diversification and the strength of the global lithium market.

Net income to EBITDA reconciliation        

	Q2 ‘22	Q2 ‘21
Net income	$29,879	$4,272
Income tax expense (benefit)	23,156	(5,580)
Net finance cost	12,211	4,761
Equity-settled share-based payment transactions	1,372	1,194
Restructuring expense	41	334
Inventory cost adjustment	—	1,497
Asset impairment reversal	—	(640)
Environmental provision	—	11,651
Strategic project expense (1)	3,107	2,525
Others	(3)	448
EBIT	69,763	20,462
Depreciation and amortization	11,363	10,939
EBITDA	81,126	31,401

(1) The Company is in the initial development and ramp-up phases for several strategic expansion projects, including AMG Vanadium’s expansion project, the joint venture with Shell, Hybrid Lithium Vanadium Redox Flow Battery System, and the lithium expansion in Germany, which incurred project expenses during the quarter but are not yet operational. AMG is adjusting EBITDA for these exceptional charges.

AMG Advanced Metallurgical Group N.V.
Condensed Interim Consolidated Income Statement
For the quarter ended June 30
In thousands of US dollars	2022	2021
	Unaudited	Unaudited
Continuing operations
Revenue	424,094	298,374
Cost of sales	(321,854)	(249,875)
Gross profit	102,240	48,499
Selling, general and administrative expenses	(37,034)	(33,232)
Environmental expense	—	(11,651)
Other income, net	40	75
Net other operating income (expense)	40	(11,576)
Operating profit	65,246	3,691
Finance income	2,081	264
Finance cost	(14,292)	(5,025)
Net finance cost	(12,211)	(4,761)
Share of loss of associates and joint ventures	—	(238)
Profit (loss) before income tax	53,035	(1,308)
Income tax (expense) benefit	(23,156)	5,580
Profit for the period	29,879	4,272
Profit attributable to:
Shareholders of the Company	29,631	3,566
Non-controlling interests	248	706
Profit for the period	29,879	4,272
Earnings per share
Basic earnings per share	0.93	0.11
Diluted earnings per share	0.91	0.11

AMG Advanced Metallurgical Group N.V.
Condensed Interim Consolidated Income Statement
For the six months ended June 30
In thousands of US dollars	2022	2021
	Unaudited	Unaudited
Continuing operations
Revenue	827,957	562,360
Cost of sales	(650,523)	(466,997)
Gross profit	177,434	95,363
Selling, general and administrative expenses	(74,496)	(66,325)
Environmental expense	—	(11,711)
Other income, net	122	173
Net other operating income (expense)	122	(11,538)
Operating profit	103,060	17,500
Finance income	2,380	474
Finance cost	(23,510)	(13,889)
Net finance cost	(21,130)	(13,415)
Share of loss of associates and joint ventures	(500)	(625)
Profit before income tax	81,430	3,460
Income tax (expense) benefit	(21,667)	6,490
Profit for the period	59,763	9,950
Profit attributable to:
Shareholders of the Company	58,746	8,665
Non-controlling interests	1,017	1,285
Profit for the period	59,763	9,950
Earnings per share
Basic earnings per share	1.84	0.29
Diluted earnings per share	1.81	0.28

AMG Advanced Metallurgical Group N.V.
Condensed Interim Consolidated Statement of Financial Position
In thousands of US dollars	June 30,2022 Unaudited	December 31, 2021
Assets
Property, plant and equipment	739,610	693,624
Goodwill and other intangible assets	41,761	44,684
Derivative financial instruments	22,508	95
Other investments	26,707	29,830
Deferred tax assets	39,953	52,937
Restricted cash	33,682	85,023
Other assets	8,394	8,471
Total non-current assets	912,615	914,664
Inventories	263,273	218,320
Derivative financial instruments	5,854	4,056
Trade and other receivables	194,563	145,435
Other assets	80,641	65,066
Current tax assets	9,093	5,888
Restricted cash	8,500	8,411
Cash and cash equivalents	300,758	337,877
Total current assets	862,682	785,053
Total assets	1,775,297	1,699,717

AMG Advanced Metallurgical Group N.V.
Condensed Interim Consolidated Statement of Financial Position
(continued)
In thousands of US dollars	June 30,2022 Unaudited	December 31, 2021
Equity
Issued capital	853	853
Share premium	553,715	553,715
Treasury shares	(14,906)	(16,596)
Other reserves	(56,868)	(96,421)
Retained earnings (deficit)	(126,088)	(173,117)
Equity attributable to shareholders of the Company	356,706	268,434
Non-controlling interests	25,052	25,718
Total equity	381,758	294,152
Liabilities
Loans and borrowings	663,781	675,384
Lease liabilities	41,277	45,692
Employee benefits	107,827	162,628
Provisions	14,467	14,298
Deferred revenue	21,105	22,341
Other liabilities	7,116	11,098
Derivative financial instruments	818	2,064
Deferred tax liabilities	5,076	5,617
Total non-current liabilities	861,467	939,122
Loans and borrowings	31,528	27,341
Lease liabilities	4,237	4,857
Short-term bank debt	12,449	13,046
Deferred revenue	20,957	18,478
Other liabilities	83,078	80,672
Trade and other payables	283,443	252,765
Derivative financial instruments	12,518	6,010
Advance payments from customers	49,601	35,091
Current tax liability	18,318	10,586
Provisions	15,943	17,597
Total current liabilities	532,072	466,443
Total liabilities	1,393,539	1,405,565
Total equity and liabilities	1,775,297	1,699,717

AMG Advanced Metallurgical Group N.V.
Condensed Interim Consolidated Statement of Cash Flows
For the six months ended June 30
In thousands of US dollars	2022	2021
	Unaudited	Unaudited
Cash from operating activities
Profit for the period	59,763	9,950
Adjustments to reconcile net profit to net cash flows:
Non-cash:
Income tax expense (benefit)	21,667	(6,490)
Depreciation and amortization	21,890	21,902
Asset impairment reversal	—	(776)
Net finance cost	21,130	13,415
Share of loss of associates and joint ventures	500	625
Loss (gain) on sale or disposal of property, plant and equipment	33	(91)
Equity-settled share-based payment transactions	2,752	2,127
Movement in provisions, pensions, and government grants	(2,917)	2,647
Working capital and deferred revenue adjustments	(63,774)	14,171
Cash generated from operating activities	61,044	57,480
Finance costs paid, net	(12,153)	(10,053)
Income tax paid	(13,040)	(4,499)
Net cash from operating activities	35,851	42,928
Cash used in investing activities
Proceeds from sale of property, plant and equipment	93	1,055
Acquisition of property, plant and equipment and intangibles	(82,608)	(78,606)
Investments in associates and joint ventures	(500)	(1,000)
Change in restricted cash	51,252	65,562
Interest received on restricted cash	76	25
Capitalized borrowing cost	(8,321)	(7,795)
Other	8	19
Net cash used in investing activities	(40,000)	(20,740)

AMG Advanced Metallurgical Group N.V.
Condensed Interim Consolidated Statement of Cash Flows
(continued)
For the six months ended June 30
In thousands of US dollars	2022	2021
	Unaudited	Unaudited
Cash (used in) from financing activities
Proceeds from issuance of debt	152	2,411
Payment of transaction costs related to debt	—	(390)
Repayment of borrowings	(8,437)	(3,127)
Net (repurchase of) proceeds from issuance common shares	(1,523)	121,569
Dividends paid	(10,098)	(3,858)
Payment of lease liabilities	(2,588)	(2,608)
Contributions by non-controlling interests	—	648
Net cash (used in) from financing activities	(22,494)	114,645
Net (decrease) increase in cash and cash equivalents	(26,643)	136,833
Cash and cash equivalents at January 1	337,877	207,366
Effect of exchange rate fluctuations on cash held	(10,476)	(3,097)
Cash and cash equivalents at June 30	300,758	341,102

This press release contains inside information within the meaning of Article 7(1) of the EU Market Abuse Regulation.

This press release contains regulated information as defined in the Dutch Financial Markets Supervision Act (Wet op het financieel toezicht).

About AMG

AMG is a global critical materials company at the forefront of CO2 reduction trends. AMG produces highly engineered specialty metals and mineral products and provides related vacuum furnace systems and services to the transportation, infrastructure, energy, and specialty metals & chemicals end markets.

AMG Clean Energy Materials segment combines AMG’s recycling and mining operations, producing materials for infrastructure and energy storage solutions while reducing the CO2 footprint of both suppliers and customers. AMG Clean Energy Materials segment spans the vanadium, lithium, and tantalum value chains. AMG Critical Materials Technologies segment combines AMG’s leading vacuum furnace technology line with high-purity materials serving global leaders in the aerospace sector. AMG Critical Minerals segment consists of AMG’s mineral processing operations in antimony, graphite, and silicon metal.

With approximately 3,300 employees, AMG operates globally with production facilities in Germany, the United Kingdom, France, the United States, China, Mexico, Brazil, India, Sri Lanka, and Mozambique, and has sales and customer service offices in Japan (www.amg-nv.com).

For further information, please contact:AMG Advanced Metallurgical Group N.V.        +1 610 975 4979Michele Fischermfischer@amg-nv.com

Disclaimer

Certain statements in this press release are not historical facts and are “forward looking.” Forward looking statements include statements concerning AMG’s plans, expectations, projections, objectives, targets, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans and intentions relating to acquisitions, AMG’s competitive strengths and weaknesses, plans or goals relating to forecasted production, reserves, financial position and future operations and development, AMG’s business strategy and the trends AMG anticipates in the industries and the political and legal environment in which it operates and other information that is not historical information. When used in this press release, the words “expects,” “believes,” “anticipates,” “plans,” “may,” “will,” “should,” and similar expressions, and the negatives thereof, are intended to identify forward looking statements. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that the predictions, forecasts, projections and other forward-looking statements will not be achieved. These forward-looking statements speak only as of the date of this press release. AMG expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in AMG's expectations with regard thereto or any change in events, conditions, or circumstances on which any forward-looking statement is based.

Attachment

• Second Quarter 2022 PR